Introduction

There are two broad questions that need to be addressed with respect to understanding the economic revival in the 1930s; first, why did the economy see a turning point in its cyclical behaviour in the third quarter of 1932 and secondly, why did the economy traverse onto a path of relative trend improvement in economic growth? In this chapter we place the contribution of protectionism in this overall context, arguing that the imposition of tariffs contributed both to the turning point and the long-term change of the economy. We must stress that tariffs by themselves provide an incomplete explanation of revival in the 1930s; it is important to recognise the impact of other influences on the recovery. In general, discussions of recovery during the period have been structured around the theme of a ‘natural recovery’, emphasising endogenous cyclical mechanisms, explanation versus a policy induced explanation. In this chapter we follow this presentational schema.

Other policy initiatives

Devaluation

We have already mentioned the contributory effect of devaluation in helping to reduce the import propensity of the economy, providing a small competitive boost that lasted throughout 1932–7. The various exchange rate indicators suggest that the competitive advantage was particularly large in 1932 (see table 4.2 and figure 4.3). Taking Redmond's (1980) figure of a 13 per cent depreciation during 1931–2 Broadberry (1986) undertook an elasticities analysis of the policy change.